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Oil Losses Not Caused by Measurement Inaccuracies, Says Petroleum Minister

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Crude oil - Investors King

The Minister of State for Petroleum Resources, Chief Timipre Sylva, has refuted claim by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) that measurement inaccuracies in the Nigerian Petroleum industry were responsible for oil Losses in the country.

Sylva maintained his stance that crude oil losses in Nigeria were because of theft and pipeline vandalism and not alleged metering error.

It could be recalled that Investors King had reported that the NUPRC had announced that about 40 per cent of the volumes credited to crude oil losses in the Nigerian petroleum industry were due to measurement inaccuracies and not theft.

NUPRC anchored its claim on a forensic audit it conducted which covered the period of January 2020 to November 2022 on crude theft numbers.

The Chief Executive, NUPRC, Gbenga Komolafe, disclosed that the audit was to ascertain with accuracy the stolen volume of crude oil within the reference period, adding that the commission was committed to dealing with the issue of inaccurate measurements.

Negating NUPRC’s argument, Sylva noted that theft and pipeline vandalism were the causes for the volumes of crude oil losses across the country.

Sylva also attributed the loss of revenue from crude production to theft, pipeline vandalism and decayed infrastructure.

In a statement issued in Abuja by his Senior Adviser, Media and Communications, Horatius Egua, the minister expressed hope that the challenges would be resolved.

He stated that the Federal Government was determined to end the trend through improved investments and security along the major oil and gas pipelines in the Niger Delta region.

Contrary to reports that about 40 per cent of the volumes of crude losses are due to measurement inaccuracies, Sylva maintained that the major sources of crude oil losses have primarily been theft, pipeline vandalism and production deferment as a result of pipeline non-availability.

According to the minister, it is a known fact that the major losses of crude oil in the country have been through theft and destruction of oil pipelines.

He said some of the oil infrastructure is worn out and cannot perform at maximum capacity, adding that there is also the issue of lack of investments in fossil fuel in the country and the drive towards renewable energy has really affected negatively new investments in the sector.

Sylva said the Federal Government had put measures in place to restore sanity in the sector, adding that contrary to the report, the problem associated with crude oil losses were systemic issues, which were being handled with a view to finding permanent solutions.

The minister charged the NUPRC and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to collaborate in order to ensure that the constraints to optimal crude oil production were speedily addressed to boost national revenue.

According to him, the Federal Government could not continue to lose revenue through perceived lapses in crude oil production, especially at a time the nation is going through scarce resources.

The minister emphasised that this was not the time to dwell on the mistakes of the past or engage in needless blame games, but a time to close all existing leakages and enable the government get maximum benefits from its crude oil and gas assets.

He said security had improved along the major oil pipelines in the region, calling for sustained efforts by all concerned to maintain maximum crude oil production.

In the midst of the crisis facing the petroleum industry, there has been renewed queues at filing stations owing to paucity of petroleum products in the country.

Oil marketers had warned that the crisis of long queues might return should petrol products are not made readily available to them.

 

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Crude Oil

Nigeria Pumps 236.2 Million Barrels in First Half of 2024

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Nigeria pumped 236.2 million barrels of crude oil in the first half of 2024, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

This figure represents an increase from the 219.5 million barrels produced during the same period in 2023.

In January, Nigeria produced 44.2 million barrels of crude oil while February saw a slight dip to 38.3 million barrels, with March following closely at 38.1 million barrels.

April and May production stood at 38.4 million barrels and 38.8 million barrels, respectively. June’s output remained consistent at 38.3 million barrels, demonstrating a stable production trend.

Despite the overall increase compared to 2023, the 2024 production figures still fall short of the 302.42 million barrels produced in the same period in 2020.

This ongoing fluctuation underscores the challenges facing Nigeria’s oil sector, which has experienced varying production levels over recent years.

On a daily basis, Nigeria’s crude oil production showed some variability. In January, the average daily production peaked at 1.43 million barrels per day (mbpd), the highest within the six-month period.

February’s production dropped to 1.32 mbpd, with a further decrease to 1.23 mbpd in March. April saw a modest increase to 1.28 mbpd, which then fell again to 1.25 mbpd in May. June ended on a positive note with a slight rise to 1.28 mbpd.

The fluctuations in daily production rates have prompted government and industry leaders to address underlying issues.

Mele Kyari, Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPC), has highlighted the detrimental effects of oil theft and vandalism on Nigeria’s production capabilities.

Kyari emphasized that addressing these security challenges is critical to boosting production and attracting investment.

Kyari also noted recent efforts to combat illegal activities, including the removal of over 5,800 illegal connections from pipelines and dismantling more than 6,000 illegal refineries.

He expressed confidence that these measures, combined with ongoing policy reforms, would support Nigeria’s goal of increasing daily production to two million barrels.

The Nigerian government remains focused on stabilizing and enhancing oil production. With recent efforts showing promising results, there is cautious optimism that Nigeria will achieve its production targets.

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Oil Prices Steady Amid Mixed Signals on Crude Demand

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Oil prices remained stable on Thursday as investors navigated conflicting signals regarding crude demand.

Brent crude oil, against which Nigerian oil is priced, settled at $85.11 a barrel, edging up by 3 cents, while U.S. West Texas Intermediate (WTI) crude dipped by 3 cents to $82.82 a barrel.

The stability comes as the U.S. economy shows signs of slowing, with unemployment benefit applications rising more than expected.

Initial claims increased by 20,000 to a seasonally adjusted 243,000 for the week ending July 1, prompting speculation that the Federal Reserve might cut interest rates sooner than anticipated. Lower rates could boost spending on oil, creating a bullish outlook for demand.

Fed officials suggested that improved inflation and a balanced labor market might lead to rate cuts, possibly by September.

“Healthy expectations of a Fed rate cut in the not-so-distant future will limit downside,” noted Tamas Varga of oil broker PVM.

However, rising jobless claims signal potential economic easing, which could dampen crude demand.

John Kilduff of Again Capital highlighted the impact of a slowing economy on oil consumption despite a significant drop in U.S. crude inventories last week.

Global factors also weighed on the market. China’s economic policies remain steady, though details are sparse, affecting investor sentiment in the world’s largest crude importer.

Meanwhile, the European Central Bank maintained interest rates, citing persistent inflation.

An upcoming OPEC+ meeting in August is expected to assess market conditions without altering output policy, according to sources. This meeting will serve as a “pulse check” for market health.

Overall, oil prices are caught between economic concerns and hopes of a rate cut, maintaining a delicate balance.

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Oil Prices Slide on China Demand Concerns, Brent Falls to $83.73

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Crude Oil - Investors King

Oil prices declined on Tuesday for the third consecutive day on growing concerns over a slowing Chinese economy and its impact on global oil demand.

Brent crude oil, against which Nigerian oil is priced, dipped by $1.12, or 1.3% at $83.73 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped $1.15, or 1.4%, to close at $80.76.

The dip in oil prices is largely attributed to disappointing economic data from China, the world’s second-largest economy.

Official figures revealed a 4.7% growth in China’s GDP for the April-June period, the slowest since the first quarter of 2023, and below the forecasted 5.1% growth expected in a Reuters poll.

This slowdown was compounded by a protracted property downturn and widespread job insecurity, which have dampened fuel demand and led many Chinese refineries to cut back on production.

“Weaker economic data continues to flow from China as continued government support programs have been disappointing,” said Dennis Kissler, Senior Vice President of Trading at BOK Financial. “Many of China’s refineries are cutting back on weaker fuel demand.”

Despite the bearish sentiment from China, there is a growing consensus among market participants that the U.S. Federal Reserve could begin cutting its key interest rates as soon as September.

This speculation has helped stem the decline in oil prices, as lower interest rates reduce the cost of borrowing, potentially boosting economic activity and oil demand.

Federal Reserve Chair Jerome Powell noted on Monday that the three U.S. inflation readings over the second quarter “add somewhat to confidence” that the pace of price increases is returning to the central bank’s target in a sustainable fashion.

This has led market participants to believe that a turn to interest rate cuts may be imminent.

Also, U.S. crude oil inventories provided a silver lining for the oil market. According to market sources citing American Petroleum Institute figures, U.S. crude oil inventories fell by 4.4 million barrels last week.

This was a much steeper drop than the 33,000 barrels decline that was anticipated, indicating strong domestic demand.

The International Monetary Fund (IMF) also weighed in, suggesting that while the global economy is set for modest growth over the next two years, risks remain.

The IMF noted cooling activity in the U.S., a bottoming-out in Europe, and stronger consumption and exports for China as key factors in the global economic landscape.

In summary, while oil prices are currently pressured by concerns over China’s economic slowdown, the potential for U.S. interest rate cuts and stronger domestic demand for crude are providing some support.

Market watchers will continue to monitor economic indicators and inventory levels closely as they gauge the future direction of oil prices.

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